Texas Attorney General Ken Paxton issued an opinion today that daily fantasy sports constitutes illegal gambling under Texas law. “It is prohibited gambling in Texas if you bet on the performance of a participant in a sporting event and the house takes a cut,” he said in a statement. “Paid daily ‘fantasy sports’ operators claim they can legally operate as an unregulated house, but none of their arguments square with existing Texas law.”
The situation isn’t quite as bad for daily fantasy operators in Texas as it is in other states that have banned the games. According to the foremost expert on daily fantasy law, unlike the attorneys general of New York and Illinois, Paxton did not threaten to prosecute daily fantasy operators. Rather, he laid out how a Texas court would likely rule if confronted, and opened the door to a flood of class action lawsuits in Texas, in addition to the 60 (at least) that have already been filed against daily fantasy operators.
By this point, however, that distinction doesn’t really matter. Daily fantasy is now outright illegal or has been declared illegal in states where about a quarter of the country lives, including three of the five most populous states (Texas, New York, Illinois). The writing is on the wall.
Daily fantasy is enormously popular and thus won’t be abolished completely, but its operators are also getting their asses whooped in state after state. The obvious solution that threads the needle is for it to be regulated, just like all other forms of gambling—and make no mistake, the fact that daily fantasy constitutes gambling is obvious to anybody who doesn’t derive financial benefits from it remaining otherwise—are regulated.
But what struck me wasn’t today’s ruling, but how oblivious and tone deaf daily fantasy stakeholders are reacting to their string of legal defeats and challenges.
Here’s the statement from DraftKings:
We strongly disagree with the Attorney General’s prediction about what the courts may or may not do if ever presented with the issue of whether daily fantasy sports are legal under Texas law. The Texas Legislature has expressly authorized games of skill, and daily fantasy sports are a game of skill. The Attorney General’s prediction is predicated on a fundamental misunderstanding of DFS. We intend to continue to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they love.
Today’s advisory opinion by the Attorney General of Texas is founded on a misinterpretation of the law and misunderstanding of the facts about fantasy sports. Fantasy sports has always been a legal contest of skill in Texas. The Texas legislature has expressly recognized that payment of an entry fee to compete for prizes in a contest of skill is not illegal gambling. Texans have long enjoyed participating legally in a wide variety of contests on that basis. The Attorney General’s advisory prediction that a Texas court might think fantasy sports fall outside that protection because fantasy sports contestants are not actually participating in the sports events disregards that the selection of a fantasy roster to compete against other contestants’ selections is a separate valid contest of skill all its own.
And the Fantasy Sports Trade Association:
If Attorney General Paxton is truly concerned about the small businesses that operate in Texas and the millions of people in Texas who enjoy fantasy sports, he would stop grandstanding and start working with the FSTA and the Texas Legislature on common sense consumer protection issues like those being proposed in Massachusetts, Florida, Indiana, Illinois, California and other forward-looking states. Paxton’s deliberate misinterpretation of existing Texas law represents the type of governmental overreach that he himself professes to reject. The FSTA vehemently opposes today’s opinion.
In November, after writing about daily fantasy a number of times, DraftKings added me to their media distribution list. In the past two months, they have emailed me 21 different statements that sound like a MadLibs version—just fill-in the name of the state and Attorney General, change a few of the specific details—of the statements above. Publicly, at least, as they have had to mobilize to fight off a torrent of bad press and dozens of legal challenges, it has become clear that all these companies can do is whine about how they know states’ laws better than the people elected to interpret them, and that everybody (including Texas; Texas!) is just anti-business and anti-customer.
Look, we’re not stupid here. Nobody believes that these states have entirely pure motives: of course they’re trying to get a cut of this enormous revenue stream! But that doesn’t mean they’re wrong about what daily fantasy is, or that daily fantasy isn’t scummy, or that screaming at the sky about how everyone is being a meanie is going to accomplish anything.
No, daily fantasy as an unregulated loosey-goosey, fly-by-night industry is soon to be obliterated, and it couldn’t happen to more deserving companies.
Photo via Getty; Illustration via Jim Cooke